The recent promulgation of ISSB standards has been met with excitement by many in the ESG world who see the ISSB’s S1 and S2 standards as a baseline for comparable sustainability reporting. And as we reported in another of today’s blogs, it got a boost from IOSCO too.
But are companies ready? New research from esgbook indicates that disclosure practices have a long way to go.
ISSB’s S2 climate-related disclosure standards will require companies to disclose Scope 1, 2, and 3 emissions, including financed emissions. Research from esgbook on current disclosure trends found that presently only 39% of entities report on Scope 1, 37% on Scope 2, and 33% on Scope 3. With many jurisdictions looking to formally adopt ISSB standards, more companies will be required to report in the coming years. However, the authors seem hopeful that ISSB will transform the current disclosure landscape stating that:
“While the… data suggests that proportionately fewer companies are currently reporting on scope emissions, the launch and formal adoption of the ISSB standards has the potential to faciliate greater disclosure rates, as reporting norms are standardized across jurisdictions. The simplification of sustainability reporting requirements, and interoperability of standards has the potential to provide the foundation for comparable and quality sustainability and climate data.”
Companies should be prepared for increased reporting requirements and should become familiar with the ISSB’s standards. Emissions scoping and reporting can be challenging, and companies that wait to implement internal controls for data gathering and reporting may find themselves struggling to catch up. Remember that reporting under the ISSB standards is not only a potential regulatory mandate: you may need to do so under contractual supplier/customer terms or to meet investor demands.
